The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, Fair Isaac Corporation (FICO) score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise (GSE) underwriting guidelines, or otherwise met the Corporation’s underwriting guidelines in place in 2015 are characterized as core loans. All other loans are generally characterized as non-core loans and represent runoff portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $9.0 billion and $7.5 billion at December 31, 2020 and 2019, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured, and therefore the Corporation does not record an allowance for credit losses related to these loans.

Nonperforming Loans and Leases

Commercial nonperforming loans increased to $2.2 billion at December 31, 2020 from $1.5 billion at December 31, 2019 with broad-based increases across multiple industries. Consumer nonperforming loans increased to $2.7 billion at December 31, 2020 from $2.1 billion at December 31, 2019 driven by deferral activity, as well as the inclusion of $144 million of certain loans that were previously classified as purchased credit-impaired loans and accounted for under a pool basis.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, 2020 and 2019. Nonperforming LHFS are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For information on the Corporation's interest accrual policies, delinquency status for loan modifications related to the pandemic and the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles.



Credit Quality


	Nonperforming Loans and Leases						Accruing Past Due 90 Days or More (1)
	December 31
(Dollars in millions)	2020			2019			2020			2019
Residential mortgage (2)	$	2,005		$	1,470		$	762		$	1,088
With no related allowance (3)	1,378			n/a			—			—
Home equity (2)	649			536			—			—
With no related allowance (3)	347			n/a			—			—
Credit Card	n/a			n/a			903			1,042
Direct/indirect consumer	71			47			33			33

Total consumer	2,725			2,053			1,698			2,163
U.S. commercial	1,243			1,094			228			106
Non-U.S. commercial	418			43			10			8
Commercial real estate	404			280			6			19
Commercial lease financing	87			32			25			20
U.S. small business commercial	75			50			115			97
Total commercial	2,227			1,499			384			250
Total nonperforming loans	$	4,952		$	3,552		$	2,082		$	2,413
Percentage of outstanding loans and leases	0.54		%	0.36		%	0.23		%	0.25		%

(1)For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles.

(2)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2020 and 2019 residential mortgage includes $537 million and $740 million of loans on which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $225 million and $348 million of loans on which interest was still accruing.

(3)Primarily relates to loans for which the estimated fair value of the underlying collateral less any costs to sell is greater than the amortized cost of the loans as of the reporting date.

n/a = not applicable

Included in the December 31, 2020 nonperforming loans are $127 million and $17 million of residential mortgage and home equity loans that prior to the January 1, 2020 adoption of the new credit loss standard were not included in nonperforming loans, as they were previously classified as purchased credit-impaired loans and accounted for under a pool basis.

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using CLTV, which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more

frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by class of financing receivables and year of origination for term loan balances at December 31, 2020, including revolving loans that converted to term loans without an additional credit decision after origination or through a TDR.



Residential Mortgage – Credit Quality Indicators By Vintage

















			Term Loans by Origination Year
(Dollars in millions)	Total as of December 31, 2020		2020		2019		2018		2017		2016		Prior
Total Residential Mortgage
Refreshed LTV
Less than or equal to 90 percent	$	207,389	$	68,907	$	43,771	$	14,658	$	21,589	$	22,967	$	35,497
Greater than 90 percent but less than or equal to 100 percent	3,138		1,970		684		128		70		96		190
Greater than 100 percent	1,210		702		174		47		39		37		211
Fully-insured loans	11,818		3,826		2,014		370		342		1,970		3,296
Total Residential Mortgage	$	223,555	$	75,405	$	46,643	$	15,203	$	22,040	$	25,070	$	39,194

Total Residential Mortgage
Refreshed FICO score
Less than 620	$	2,717	$	823	$	177	$	139	$	170	$	150	$	1,258
Greater than or equal to 620 and less than 680	5,462		1,804		666		468		385		368		1,771
Greater than or equal to 680 and less than 740	25,349		8,533		4,679		1,972		2,427		2,307		5,431
Greater than or equal to 740	178,209		60,419		39,107		12,254		18,716		20,275		27,438
Fully-insured loans	11,818		3,826		2,014		370		342		1,970		3,296
Total Residential Mortgage	$	223,555	$	75,405	$	46,643	$	15,203	$	22,040	$	25,070	$	39,194



Home Equity - Credit Quality Indicators

	Total		Home Equity Loans and Reverse Mortgages (1)		Revolving Loans		Revolving Loans Converted to Term Loans
(Dollars in millions)	December 31, 2020
Total Home Equity
Refreshed LTV
Less than or equal to 90 percent	$	33,447	$	1,919	$	22,639	$	8,889
Greater than 90 percent but less than or equal to 100 percent	351		126		94		131
Greater than 100 percent	513		172		118		223
Total Home Equity	$	34,311	$	2,217	$	22,851	$	9,243

Total Home Equity
Refreshed FICO score
Less than 620	$	1,082	$	250	$	244	$	588
Greater than or equal to 620 and less than 680	1,798		263		568		967
Greater than or equal to 680 and less than 740	5,762		556		2,905		2,301
Greater than or equal to 740	25,669		1,148		19,134		5,387
Total Home Equity	$	34,311	$	2,217	$	22,851	$	9,243

(1)Includes reverse mortgages of $1.3 billion and home equity loans of $885 million which are no longer originated.



Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage










	Direct/Indirect
					Term Loans by Origination Year												Credit Card
(Dollars in millions)	Total Direct/Indirect as of December 31, 2020		Revolving Loans		2020		2019		2018		2017		2016		Prior		Total Credit Card as of December 31, 2020		Revolving Loans		Revolving Loans Converted to Term Loans (3)
Refreshed FICO score
Less than 620	$	959	$	19	$	111	$	200	$	175	$	243	$	148	$	63	$	4,018	$	3,832	$	186
Greater than or equal to 620 and less than 680	2,143		20		653		559		329		301		176		105		9,419		9,201		218
Greater than or equal to 680 and less than 740	7,431		80		2,848		2,015		1,033		739		400		316		27,585		27,392		193
Greater than or equal to 740	36,064		120		12,540		10,588		5,869		3,495		1,781		1,671		37,686		37,642		44
Other internal credit metrics (1, 2)	44,766		44,098		74		115		84		67		52		276		—		—		—
Total credit card and other consumer	$	91,363	$	44,337	$	16,226	$	13,477	$	7,490	$	4,845	$	2,557	$	2,431	$	78,708	$	78,067	$	641

(1)Other internal credit metrics may include delinquency status, geography or other factors.

(2)Direct/indirect consumer includes $44.1 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at December 31, 2020.

(3)Represents TDRs that were modified into term loans.



Commercial – Credit Quality Indicators By Vintage (1, 2)
			Term Loans
			Amortized Cost Basis by Origination Year

(Dollars in millions)	Total as of December 31, 2020		2020		2019		2018		2017		2016		Prior		Revolving Loans
U.S. Commercial
Risk ratings
Pass rated	$	268,812	$	33,456	$	33,305	$	17,363	$	14,102	$	7,420	$	21,784	$	141,382
Reservable criticized	19,916		2,524		2,542		2,689		854		698		1,402		9,207
Total U.S. Commercial	$	288,728	$	35,980	$	35,847	$	20,052	$	14,956	$	8,118	$	23,186	$	150,589

Non-U.S. Commercial
Risk ratings
Pass rated	$	85,914	$	16,301	$	11,396	$	7,451	$	5,037	$	1,674	$	2,194	$	41,861
Reservable criticized	4,546		914		572		492		436		138		259		1,735
Total Non-U.S. Commercial	$	90,460	$	17,215	$	11,968	$	7,943	$	5,473	$	1,812	$	2,453	$	43,596

Commercial Real Estate
Risk ratings
Pass rated	$	50,260	$	8,429	$	14,126	$	8,228	$	4,599	$	3,299	$	6,542	$	5,037
Reservable criticized	10,104		933		2,558		2,115		1,582		606		1,436		874
Total Commercial Real Estate	$	60,364	$	9,362	$	16,684	$	10,343	$	6,181	$	3,905	$	7,978	$	5,911

Commercial Lease Financing
Risk ratings
Pass rated	$	16,384	$	3,083	$	3,242	$	2,956	$	2,532	$	1,703	$	2,868	$	—
Reservable criticized	714		117		117		132		81		88		179		—
Total Commercial Lease Financing	$	17,098	$	3,200	$	3,359	$	3,088	$	2,613	$	1,791	$	3,047	$	—

U.S. Small Business Commercial (3)
Risk ratings
Pass rated	$	28,786	$	24,539	$	1,121	$	837	$	735	$	527	$	855	$	172
Reservable criticized	1,148		76		239		210		175		113		322		13
Total U.S. Small Business Commercial	$	29,934	$	24,615	$	1,360	$	1,047	$	910	$	640	$	1,177	$	185
Total (1, 2)	$	486,584	$	90,372	$	69,218	$	42,473	$	30,133	$	16,266	$	37,841	$	200,281

(1) Excludes $5.9 billion of loans accounted for under the fair value option at December 31, 2020.

(2) Includes $58 million of loans that converted from revolving to term loans.

(3) Excludes U.S. Small Business Card loans of $6.5 billion. Refreshed FICO scores for this portfolio are $265 million for less than 620; $582 million for greater than or equal to 620 and less than 680; $1.7 billion for greater than or equal to 680 and less than 740; and $3.9 billion greater than or equal to 740.

Due to the economic impact of COVID-19, commercial asset quality weakened during 2020. Commercial reservable criticized utilized exposure increased to $38.7 billion at December 31, 2020 from $11.5 billion (to 7.31 percent from 2.09 percent of total commercial reservable utilized exposure) at December 31, 2019 with increases spread across multiple industries, including travel and entertainment.

Troubled Debt Restructurings

The Corporation has been entering into loan modifications with borrowers in response to the pandemic, most of which are not classified as TDRs, and therefore are not included in the discussion below. For more information on the criteria for classifying loans as TDRs, see Note 1 – Summary of Significant Accounting Principles.

Consumer Real Estate

Modifications of consumer real estate loans are classified as TDRs when the borrower is experiencing financial difficulties and a concession has been granted. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof. Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated

modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.

Consumer real estate loans of $372 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were included in TDRs at December 31, 2020, of which $102 million were classified as nonperforming and $68 million were loans fully insured.

Consumer real estate TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan’s original effective interest rate. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral, and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Consumer real estate loans that reach 180 days past due prior to modification are charged off to their net realizable value, less costs to sell, before they are modified as TDRs in accordance with established policy. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are

protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.

At December 31, 2020 and 2019, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $123 million and $229 million at December 31, 2020 and 2019. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at December 31, 2020 was $1.2 billion. Although the Corporation has paused formal loan foreclosure proceedings and foreclosure sales for occupied properties, during 2020, the Corporation reclassified $182 million of consumer real estate

loans completed or which were in process prior to the pause in foreclosures, to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.

The table below presents the December 31, 2020, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during 2020, 2019 and 2018. The following Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.



Consumer Real Estate – TDRs Entered into During 2020, 2019 and 2018 (1)

		Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate (2)
(Dollars in millions)	December 31, 2020
Residential mortgage		$	732	$	646	3.66	%	3.59	%
Home equity		87		69		3.67		3.61
Total		$	819	$	715	3.66		3.59

	December 31, 2019
Residential mortgage		$	464	$	377	4.19	%	4.13	%
Home equity		141		101		5.04		4.31
Total		$	605	$	478	4.39		4.17

	December 31, 2018
Residential mortgage		$	774	$	641	4.33	%	4.21	%
Home equity		489		358		4.46		3.74
Total		$	1,263	$	999	4.38		4.03

(1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.

(2)The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.

The table below presents the December 31, 2020, 2019 and 2018 carrying value for consumer real estate loans that were modified in a TDR during 2020, 2019 and 2018, by type of modification.



Consumer Real Estate – Modification Programs (1)

	TDRs Entered into During

(Dollars in millions)	2020		2019		2018
Modifications under government programs	$	13	$	35	$	61




Modifications under proprietary programs	570		174		523





Loans discharged in Chapter 7 bankruptcy (2)	53		68		130
Trial modifications	79		201		285
Total modifications	$	715	$	478	$	999

(1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.

(2)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

The table below presents the carrying value of consumer real estate loans that entered into payment default during 2020, 2019 and 2018 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.



Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months (1)


(Dollars in millions)	2020		2019		2018
Modifications under government programs	$	16	$	26	$	39
Modifications under proprietary programs	51		88		158
Loans discharged in Chapter 7 bankruptcy (2)	19		30		64
Trial modifications (3)	54		57		107
Total modifications	$	140	$	201	$	368

(1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.

(2)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

(3)Includes trial modification offers to which the customer did not respond.

Credit Card and Other Consumer

The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal and local laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation

agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs, which are written down to collateral value and placed on nonaccrual status no later than the time of discharge.

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December 31, 2020, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2020, 2019 and 2018.



Credit Card and Other Consumer – TDRs Entered into During 2020, 2019 and 2018 (1)

		Unpaid Principal Balance		Carrying Value (2)		Pre-Modification Interest Rate		Post-Modification Interest Rate

(Dollars in millions)	December 31, 2020
Credit card		$	269	$	277	18.16	%	5.63	%

Direct/Indirect consumer		52		37		5.83		5.83

Total		$	321	$	314	16.70		5.65

	December 31, 2019
Credit card		$	340	$	355	19.18	%	5.35	%

Direct/Indirect consumer		40		21		5.23		5.21

Total		$	380	$	376	18.42		5.34

		December 31, 2018
Credit card		$	278	$	292	19.49	%	5.24	%

Direct/Indirect consumer		42		23		5.10		4.95

Total		$	320	$	315	18.45		5.22

(1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.

(2)Includes accrued interest and fees.

The table below presents the December 31, 2020, 2019 and 2018 carrying value for Credit Card and Other Consumer loans that were modified in a TDR during 2020, 2019 and 2018, by program type.



Credit Card and Other Consumer – TDRs by Program Type at December 31 (1)





(Dollars in millions)	2020		2019		2018
Internal programs	$	225	$	247	$	199
External programs	73		108		93
Other	16		21		23
Total	$	314	$	376	$	315

(1)Includes accrued interest and fees. For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles.

Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for credit card and other consumer. Based on historical experience, the Corporation estimates that 13 percent of new credit card TDRs and 19 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification.

Commercial Loans

Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of

maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit the borrower while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.

At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows resulting from the modified terms. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification. For more information on modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note.

At December 31, 2020 and 2019, the Corporation had $1.7 billion and $2.2 billion of commercial TDRs with remaining commitments to lend additional funds to debtors of $402 million and $445 million. The balance of commercial TDRs in payment default was $218 million and $207 million at December 31, 2020 and 2019.

Loans Held-for-sale

The Corporation had LHFS of $9.2 billion at both December 31, 2020 and 2019. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $20.1 billion, $30.6 billion and $29.2 billion for 2020, 2019 and 2018, respectively. Cash used for originations and purchases of LHFS totaled approximately $19.7 billion, $28.9 billion and $28.1 billion for 2020, 2019 and 2018, respectively.

Accrued Interest Receivable

Accrued interest receivable for loans and leases and loans held-for-sale at December 31, 2020 and 2019 was $2.4 billion and $2.6 billion and is reported in customer and other receivables on the Consolidated Balance Sheet.

Outstanding credit card loan balances include unpaid principal, interest and fees. Credit card loans are not classified as nonperforming but are charged off no later than the end of the month in which the account becomes 180 days past due, within 60 days after receipt of notification of death or bankruptcy, or upon confirmation of fraud. During 2020, the Corporation reversed $512 million of interest and fee income against the income statement line item in which it was originally recorded upon charge-off of the principal balance of the loan.

For the outstanding residential mortgage, home equity, direct/indirect consumer and commercial loan balances classified as nonperforming during 2020, the Corporation reversed $44 million of interest and fee income at the time the loans were classified as nonperforming against the income statement line item in which it was originally recorded. For more information on the Corporation's nonperforming loan policies, see Note 1 – Summary of Significant Accounting Principles.

Allowance for Credit Losses

On January 1, 2020, the Corporation adopted the new accounting standard that requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime ECL inherent in the Corporation’s relevant financial assets. Upon adoption of the new accounting standard, the Corporation recorded a $3.3 billion, or 32 percent, increase in the allowance for credit losses on January 1, 2020, which was comprised of a net increase of $2.9 billion in the allowance for loan and lease losses and a $310 million increase in the reserve for unfunded lending commitments. The net increase in the allowance for loan and lease losses was primarily driven by a $3.1 billion increase in credit card as the Corporation now reserves for the life of these receivables. The increase in the reserve for unfunded lending commitments included $119 million in the consumer portfolio for the undrawn portion of HELOCs and $191 million in the commercial portfolio. For more information on the Corporation's credit loss accounting policies including the allowance for credit losses see Note 1 – Summary of Significant Accounting Principles.

The allowance for credit losses is estimated using quantitative and qualitative methods that consider a variety of factors, such as historical loss experience, the current credit

quality of the portfolio and an economic outlook over the life of the loan. Qualitative reserves cover losses that are expected but, in the Corporation's assessment, may not be adequately reflected in the quantitative methods or the economic assumptions. The Corporation incorporates forward-looking information through the use of several macroeconomic scenarios in determining the weighted economic outlook over the forecasted life of the assets. These scenarios include key macroeconomic variables such as gross domestic product, unemployment rate, real estate prices and corporate bond spreads. The scenarios that are chosen each quarter and the weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, internal and third-party economist views, and industry trends.

As of January 1, 2020, to determine the allowance for credit losses, the Corporation used a series of economic outlooks that resulted in an economic outlook that was weighted towards the potential of a recession with some expectation of tail risk similar to the severely adverse scenario used in stress testing. Various economic outlooks were also used in the December 31, 2020 estimate for allowance for credit losses that included consensus estimates, multiple downside scenarios which assumed a significantly longer period until economic recovery, a tail risk scenario similar to the severely adverse scenario used in stress testing and an upside scenario to reflect the potential for continued improvement in the consensus outlooks. The weighted economic outlook assumes that the U.S. unemployment rate at the end of 2021 would be relatively consistent with the level as of December 2020, slightly above 6.5 percent. Additionally, in this economic outlook, U.S. gross domestic product returns to pre-pandemic levels in the early part of 2022. The allowance for credit losses considers the impact of enacted government stimulus, including the COVID-19 Emergency Relief Act of 2020, and continues to factor in the unprecedented nature of the current health crisis.

The Corporation also factored into its allowance for credit losses an estimated impact from higher-risk segments that included leveraged loans and industries such as travel and entertainment, which have been adversely impacted by the effects of COVID-19, as well as the energy sector. The Corporation also holds additional reserves for borrowers who requested deferrals that take into account their credit characteristics and payment behavior subsequent to deferral.

The allowance for credit losses at December 31, 2020 was $20.7 billion, an increase of $7.2 billion compared to January 1, 2020. The increase in the allowance for credit losses was driven by the deterioration in the economic outlook resulting from the impact of COVID-19. The increase in the allowance for credit losses was comprised of a net increase of $6.4 billion in the allowance for loan and lease losses and a $755 million increase in the reserve for unfunded lending commitments. The increase in the allowance for loan and lease losses was attributed to $418 million in the consumer real estate portfolio, $1.8 billion in the credit card and other consumer portfolio, and $4.2 billion in the commercial portfolio.

Outstanding loans and leases excluding loans accounted for under the fair value option decreased $53.9 billion in 2020, driven by consumer loans, which decreased $37.1 billion primarily due to a decline in credit card loans from reduced retail spending and higher payments.

The changes in the allowance for credit losses, including net charge-offs and provision for loan and lease losses, are detailed in the table below.



	Consumer Real Estate		Credit Card and Other Consumer		Commercial		Total































(Dollars in millions)	2020
Allowance for loan and lease losses, January 1	$	440	$	7,430	$	4,488	$	12,358
Loans and leases charged off	(98)		(3,646)		(1,675)		(5,419)
Recoveries of loans and leases previously charged off	201		891		206		1,298
Net charge-offs	103		(2,755)		(1,469)		(4,121)
Provision for loan and lease losses	307		4,538		5,720		10,565
Other (1)	8		—		(8)		—
Allowance for loan and lease losses, December 31	858		9,213		8,731		18,802
Reserve for unfunded lending commitments, January 1	119		—		1,004		1,123
Provision for unfunded lending commitments	18		—		737		755

Reserve for unfunded lending commitments, December 31	137		—		1,741		1,878
Allowance for credit losses, December 31	$	995	$	9,213	$	10,472	$	20,680

	2019
Allowance for loan and lease losses, January 1	$	928	$	3,874	$	4,799	$	9,601
Loans and leases charged off	(522)		(4,302)		(822)		(5,646)
Recoveries of loans and leases previously charged off	927		911		160		1,998
Net charge-offs	405		(3,391)		(662)		(3,648)
Provision for loan and lease losses	(680)		3,512		742		3,574
Other (1)	(107)		1		(5)		(111)
Allowance for loan and lease losses, December 31	546		3,996		4,874		9,416
Reserve for unfunded lending commitments, January 1	—		—		797		797
Provision for unfunded lending commitments	—		—		16		16
Reserve for unfunded lending commitments, December 31	—		—		813		813
Allowance for credit losses, December 31	$	546	$	3,996	$	5,687	$	10,229

	2018
Allowance for loan and lease losses, January 1	$	1,720	$	3,663	$	5,010	$	10,393
Loans and leases charged off	(690)		(4,037)		(675)		(5,402)
Recoveries of loans and leases previously charged off	664		823		152		1,639
Net charge-offs	(26)		(3,214)		(523)		(3,763)

Provision for loan and lease losses	(492)		3,441		313		3,262
Other (1)	(274)		(16)		(1)		(291)




Allowance for loan and lease losses, December 31	928		3,874		4,799		9,601
Reserve for unfunded lending commitments, January 1	—		—		777		777
Provision for unfunded lending commitments	—		—		20		20

Reserve for unfunded lending commitments, December 31	—		—		797		797
Allowance for credit losses, December 31	$	928	$	3,874	$	5,596	$	10,398

(1)Primarily represents write-offs of purchased credit-impaired loans in 2019, and the net impact of portfolio sales, transfers to held-for-sale and transfers to foreclosed properties.